Over the years, financial institutions, which typically provide loans and/or lines of credit to individuals and/or business entities, have developed sophisticated systems to manage risk. Models and mathematical formulas have long been tools of the industry for developing an approximation of risk when evaluating customers in consideration for loans and/or lines of credit. Credit reporting agencies such as Experian, Equifax and TransUnion provide financial institutions with reports reflecting an individual's or business' historical payment data. A credit report is usually the first consideration in evaluating a customer's credit worthiness and most often is the determining factor in whether a loan is issued or a line of credit with a credit limit is issued.
Other considerations exist for a financial institution to use in addition to a credit report to determine if a customer is able and/or likely to repay a loan and/or money borrowed against a line of credit. The income of a borrower or the fiscal health of a business, along with the financial obligations of the borrowing entity, are often considered in conjunction with the credit report in calculating a level of certainty that a loan will not go unpaid.
Financial institutions occasionally reevaluate a customer's payment history when determining whether to increase a customer's credit limit. Sometimes this is completed at a customer's request, at other times, it is completed to encourage customer loyalty and maximize profit by encouraging reliable customers to borrow more. However, some providers of corporate lines of credit providers allow their client's to place individual limits on corporate cards issued to employees. For example, a cardmember may be eligible for a $20,000 line of credit; however the client may choose to place a self-imposed credit limit at $10,000. Clients may find this desirable to help manage debt and to control spending when corporate cards are issued to employees for business related expenses.
Cardmembers who would otherwise qualify for a higher credit limit, but yet have applied a lower client-imposed credit limit, may encounter declined purchases because they have reached such limit. A client is a corporate or organizational entity that issues corporate credit cards to internal cardmembers. When such cardmember is declined at the point of sale, they are often not aware that it is due to, for example, a client-imposed limit that has been set by a program administrator within the corporation. A declined cardmember may therefore assume that a problem exists with the issuer. Declines often result in embarrassment and/or inconvenience for the cardmember, and lost customer loyalty to the issuer. Declines due to client-imposed limits also may represent a loss in possible revenue to the issuer of a credit line. Within the United States alone, one financial card company may have over $800 MM in limits-based declines which translates to lost revenue and/or substantial customer dissatisfaction.
Therefore, a need exists for a system and method for creating recommended limit reports that can be provided to program administrators who may choose to share the information with their cardmember clients. A limits report providing statistics and analysis regarding a cardmembers spending patterns may be used by an account manager and/or program administrator to encourage the client to raise their client-imposed credit limit to a level sufficient to reduce declines, while maintaining their debt management goals.